C&W claims IBM price gouging

'significant levels of overcharging'

Cable & Wireless has brought a lawsuit against IBM for what it calls "substantial overcharging" by the IT services company.

In the Cable & Wireless 2003 annual report published on Friday, the telecom said the legal action relates to a global IT services deal it signed with IBM back in December 2000.

As part of the deal, Cable & Wireless was to conduct regular benchmarking exercises to monitor elements like price and service levels provided by IBM. In a benchmark conducted in February 2002, Cable & Wireless said it discovered "significant levels of overcharging by IBM."

Ever since that benchmark was completed last spring, the companies have been in dispute over its results and over whether IBM should repay the amount it was deemed to have overcharged. Mediation failed to resolve the dispute and Cable & Wireless is now seeking damages.

According to the annual report, Cable & Wireless claims it was overcharged by £115 million in respect of its UK operations and $22 million in the US, and those numbers continue to rise for each month that IBM refuses to drop its charges, the telecoms firm said. IBM has lodged counter-claims, including an action by IBM Japan which alleges that it is due money from Cable & Wireless. A court date for a trial in connection with the overcharging accusations has been set for this September.

The annual report also revealed a number of ongoing legal actions against Cable & Wireless by companies in the US and Central America, including a suit by two companies in Panama. The plaintiffs, who had been seeking damages for up to $125 million, claimed that Cable & Wireless had breached its contract terms.

The court agreed that the telecoms firm had failed to "maintain in sufficient confidence" certain proprietary information of the plaintiffs and ordered the telecom to pay $67.3 million in damages. Cable & Wireless said it is appealing the judgement and has not paid any of the damages.

© ENN

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